Latest Fed move is another bond bummer

Maybe it’s time for income investors to go on a hiring spree. Have you considered offering some unemployed CPA a chance to manage your finances year-round? Surely there’s a former teacher out there who can tutor your kids or grandkids full time? Or is your garden big enough to merit a live-in mower and weed-puller?

I’m being sardonic, of course. But with the Federal Reserve this week explicitly tying interest rates to the unemployment rate for the first time, conservative investors (retirees included) are undoubtedly desperate to do whatever it takes to get the jobless rate down to the Fed’s 6.5% target. Otherwise, the Fed will continue to keep interest rates near zero, crimping the yield on Treasurys and safer corporate bonds—and deriving a significant income from your bond portfolio will continue to be the investing equivalent of wringing blood from a turnip.

(The Fed also says it’ll raise rates if inflation forecasts rise, but that development would hurt many bond owners in the short run. See more in the video below.)

In the meantime, investors face the same challenge they’ve been facing for four years and counting: Balancing the search for even kinda-sorta-decent yields against the greater risks that come with higher income. MarketWatch’s Jonnelle Marte surveyed some investing pros for guidance about finding that sweet spot; she shares their advice here. And Encore will continue to look for more ideas on this topic from now until…well, possibly until 2015, since that’s when the Fed thinks it’ll hit its employment target.

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